11 In 2007, there were 52,332 new homes enrolled in the warranty plan, with a total of 465,116 homes under warranty. The Corporation paid out over $9 million in warranty claims. In the same year, 199 home owners complained to the Ministry about the Ontario New Home Warranty Plan and Tarion – all expecting the Ministry responsible for “consumer services” to help them. Considerable time was expended by Ministry officials in explaining the limited oversight role that the Ministry plays with respect to new home ownership. Much frustration and wasted effort could have been avoided if the Ministry had clearly and publicly set out its limited role with respect to matters concerning Tarion and the administration of the Ontario New Home Warranty Plan.
12 Considering the fact that hundreds of thousands of people rely on the warranty plan each year and that a new home purchase is a significant investment, I have concluded that the Ministry’s failure to clearly set out the nature of its role with respect to new home ownership needs to be remedied immediately. I am recommending that the Ministry clarify its role in this area, including with respect to publicly appointed members of the Tarion Board of Directors.
13 My Office received more than 100 complaints over the past year from homeowners about their dealings with Tarion and the Ministry. These complaints came from individual homeowners, some Members of Provincial Parliament writing on behalf of constituents, and from a homeowner advocacy group.
14 Ombudsman staff began to monitor complaints relating to new home ownership after our Office received a detailed submission in March 2007 from the advocacy group, which called for the Ombudsman to be given oversight over Ontario’s new home warranty system and Tarion.
15 Although I have oversight over the Licence Appeal Tribunal, which handles appeals of decisions made by Tarion, I do not have jurisdiction over Tarion itself. As a result, my Office cannot investigate individual complaints from homeowners about Tarion. In 1986, in submissions to a Legislative Standing Committee, former Ombudsman Dr. Daniel Hill first suggested that this area be made part of the Ombudsman’s mandate, but for three decades it has remained outside the scope of the Ombudsman’s authority. One option recently contemplated by the Ministry as a way to enhance Tarion’s governance and accountability was to expand the Ombudsman’s jurisdiction to include Tarion. However, the Ministry does not appear to be seriously considering this possibility at present.
16 The complaints were assessed by the Special Ombudsman Response Team (SORT). It became apparent that there was considerable confusion among consumers regarding the Ministry’s role with respect to new home warranty protection. Accordingly, I determined that it was appropriate to investigate how the Ministry represents its relationship with Tarion to the public. A notice of intent to investigate was issued to the Ministry on February 20, 2008.
17 A team of three SORT investigators and two Early Resolution Officers conducted the investigation. They interviewed Ministry staff involved in dealing with delegated authorities, as well as four of the appointees to the Tarion Board of Directors, and two of Tarion’s senior counsel. Investigators also reviewed the complaints we had received and conducted in-depth interviews with several homeowners.
18 The team reviewed binders of materials provided by the Ministry containing thousands of pages of documentation. This included a review of correspondence submitted by homeowners to the Ministry and the Ministry’s responses to homeowners dating back to 2005.
19 We also reviewed new home warranty programs in other provinces, to better understand what information is provided to consumers in those jurisdictions. Home warranty programs vary across the country, with only three provinces having mandatory new home warranty protection: Ontario, British Columbia and Quebec.
20 We received excellent co-operation from the Ministry throughout the investigation.
21 Ontario first introduced a mandatory new home warranty plan in 1976. An independent non-profit corporation has always administered the plan. Its name has changed a few times over the years, but since 2004 it has been Tarion. On its website, Tarion states that its role is to ensure that builders comply with the legislation and to “step in to protect consumers when builders fail to fulfill their warranty obligations”.
22 Tarion’s total revenue in 2006 was $70,645,000. A substantial portion of this – almost 47% – derives from home enrolment fees. So, for every $99 contributed by buyers through the home enrolment fee, builders paid roughly $6 through registration and renewal fees. Available funds from the revenues collected from home enrolment and builder registration fees are invested. Investment revenue, which accounted for roughly 52% of Tarion’s total revenue in 2006, was used for various purposes such as settling warranty claims, providing for costs related to investigation, enforcement and other administrative costs associated with administering the legislation.
23 All new homeowners are provided with a Home Owner Information Package that sets out the process for submitting Statutory Warranty Forms for outstanding warranty items. When a claim is filed, it usually triggers a period of 120 days for the builder to address the repairs. If the matter remains unresolved, the homeowner has 30 days to inform Tarion and request conciliation. The builder generally has 30 days from the date of that request to resolve any outstanding problems. If the repairs are still not completed, Tarion conducts the conciliation with the homeowner and the builder present. A report is prepared, outlining the items that the builder must resolve and setting out whatever is not covered.
24 Some homeowners encounter problems that cannot be resolved to their satisfaction through the warranty program. In these situations, they can choose to appeal to the Licence Appeal Tribunal, or pursue their legal options through a civil suit. In the 2005-2006 fiscal year, the Licence Appeal Tribunal received 173 with regard to the warranty program.
25 The Ministry is responsible for oversight of a number of arm’s-length bodies carrying out delegated administrative authority. According to Ministry officials, the Safety and Consumer Statutes Administration Act governs other delegated authorities, but does not apply to Tarion. As the Deputy Minister explained to us in response to our notice of intent to investigate: